On the Line: How to make outsourcing pay off, take II

You'll never guess when I wrote this column. I'll tell you later. For now, consider how well it applies to the current state of Canada's telecom industry, and the challenges it puts before customers, suppliers...even consultants.Outsourcing isn't a new idea. For decades, companies have been hiring outside firms to run cafeterias, clean floors, mow lawns, and even operate IT systems.And, in the past decade or so, telecom outsourcing has become more popular. Outsourcers are now eager to run networks, operate call centres, provide operator services. Many of our clients have entered into such arrangements - and many of them have been very pleased with the results.But for some, outsourcing seems to be a mixed blessing. In the past few months, several organizations have retained us to review their outsourcing arrangements. They were using different companies for different purposes, but they all said roughly the same thing: "This isn't working out very well. Did we make a mistake?"If you aren't happy with your outsourcer, it may be that you've hired the wrong company for the wrong job - that they just aren't able to deliver the services you need, and you should get out of the contract. Or maybe you've just hired the wrong company.But that hasn't been true in the engagements we've worked on. In every case, effective action by the customer resolved the problems.Three Causes of FailureIn each case, we found that the "outsourcing problems" stem from one of three underlying causes:1. The original agreement didn't specify clear, measurable objectives. All too often, the salesperson makes glowing promises and the customer doesn't know enough about telecom to stipulate the quantifiable results that have to be achieved. The agreement should specify metrics and if these metrics aren't established at the beginning, you have no way of determining whether you're getting what you're paying for.2. Circumstances have changed since the agreement was signed, but the agreement hasn't changed. One client had merged with a competitor, doubled market share, and radically expanded its data network since outsourcing telecom - but the agreement remained unchanged. The outsourcer was doing the specified job, but the work requirements had changed.3. The customer has not managed the relationship. There are many variants of this, ranging from, "The manager who originally handled this has retired and no one else understands it," through to "We've outsourced it, so we shouldn't have to manage it." Outsourcers don't have ESP - without guidance and direction, they can't meet your needs.All three of these causes boil down to one: lack of management. Note: Perhaps I really meant "lack of common sense."Constant FluxTelecom isn't food service. Cafeteria meals don't change very often (ask any university student living in residence), and it's pretty easy to tell when the quality isn't acceptable. So using an outside contractor for the cafeteria doesn't require much day-to-day management.Telecom, by contrast, is in a state of constant flux. Technologies, products, services, suppliers, and prices change constantly, and so do your needs. It may make sense to hire an outsourcer to provide expert management - but the outsourcing arrangement has to be managed, and only your organization can do that.The best ones explain this up front, because they know that they can't deliver service effectively without continuing customer involvement. But some salespeople are so eager to demonstrate "savings" that they fail to mention, or even deny, that someone from the customer organization must be in charge - which takes time and effort.Even if the sales presentation is quite clear on this issue, some senior managers simply don't hear the message - they want to cut costs, right now, and outsourcing seems to be the way to go. If they do hear the message, some don't follow through - a manager is assigned responsibility for dealing with the outsourcer, but not given the time or resources to do the job properly.So What Should You Do?The best way to ensure outsourcing success is to do it right from the beginning: set clear objectives for all service areas, plan for regular review meetings, assign a knowledgeable manager to act as liaison, and so on.But even if you didn't do that up front, it's not too late - any negotiated agreement can be renegotiated. The key to success - just as with a brand new agreement - is to articulate what you want, and to set a deal ensuring that both you and the outsourcer achieve your business objectives. There are very few good outsourcers out there, and a knowledgeable customer can almost always win a fair deal.The key phrase is "knowledgeable customer." You have to know what you want, and you have to be prepared to devote the management time and effort needed to ensure that you get what you expected - and that the relationship evolves as your needs change.My take on this: If you don't know what you want, whether that's insourcing, outsourcing or anything else, you almost certainly won't get it.I wrote this column in 1996. Eleven years later I think the advice offered is still relevant. Let me know what you think."On the Line" is written by Henry Dortmans, president of Angus Dortmans Associates. Henry welcomes comments and suggestions (names are withheld and specifics disguised to protect the innocent...and the guilty). Send an email to henry@angusdortmans.ca or call him at (416) 849-2896. For information on consulting services, seminars, and speeches, visit http://www.angusdortmans.ca/.

On the Line: How to make outsourcing pay off, take II

News | June 7, 2007

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